Washington Insider -- Tuesday

Democrats and the Trade Tightrope

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

More Information on US Farmer Aid Plan Expected This Week

Contacts believe that the plan is not expected to be based on 2019 plantings and/or production because officials do not want to skew plantings. However, contacts note that to utilize the Commodity Credit Corporation (CCC) authority, there must be some element of injury from the current situation. That could come in various ways, including indirect impacts.

Payment rate rumors are rampant, but contacts say they are still being worked out.

By not basing payments on current production, payouts can come much sooner than the initial program for 2018 actual production, contacts note.

While a waiver of the pay cap that was in place for the first Market Facilitation Payments (MFPs) is not likely, officials are reviewing the situation and perhaps there will be changes on this facet relative to last year's program.

Implementation of the coming program is important, as sources note there was still a considerable amount of time per producer for the 2918 effort – around one hour per application and there were one million applications for aid submitted.

The coming plan will likely come in installments and could be impacted if there any announced U.S.-China trade agreement.

European Business Group Says China Technology Transfer Issues Increasing

Forced technology transfers in China – one of the issues at the heart of the U.S.-China dispute – continue to increase even as the Chinese government says those types of actions do not take place, according to a results of a survey released by the European Union Chamber of Commerce in China.

The group said 20% of its members reported being compelled to transfer technology as a condition for market access in China, up from 10% two years ago. The survey indicated that nearly 25% of those reporting the activity said it was still ongoing with another 39% saying it had happened less than two years ago.

The level of forced technology transfers was higher in areas like chemicals and petroleum (30%) medical devices (28%) and pharmaceuticals (27%), the survey said.

"Unfortunately, our members have reported that compelled technology transfers not only persist, but that they happen at double the rate of two years ago," European Chamber Vice President Charlotte Roule said. "It might be due to a number of reasons... Either way, it is unacceptable that this practice continues in a market as mature and innovative as China."

The survey was done in January and February, before the latest tariff increase announced by the US. As for the US tariffs, the group said nearly half of the companies affected said they had covered the increased costs themselves and kept prices steady.

Washington Insider: Democrats and the Trade Tightrope

The Hill is reporting this week that Speaker Nancy Pelosi, D-Calif., is “walking a tightrope” as President Trump presses the House to scrap and replace the North American Free Trade Agreement. And, The Hill says, “Pelosi is in no hurry to help Trump’s reelection campaign, as a trade victory may do.”

At the same time, the Speaker is seeking legislative victories of her own “to lend a messaging boost to vulnerable Democrats also seeking to woo voters,” and help her hold control of the House. That means finding common ground with Trump on “core issues,” and trade is one where the sides have some basis of agreement, The Hill opines.

Much work remains, however, and Democrats are threatening to back away unless they win more sway over provisions within the “new NAFTA.”

Pelosi and other top Democrats huddled with US Trade Representative Robert Lighthizer last week, amplifying their demands that stronger labor, environmental and prescription drug pricing protections be written explicitly into the agreement text.

Democrats are virtually united in their demands, with conservative-leaning Blue Dogs joining liberal lawmakers in insisting on the new protections. However, some of the Democratic demands would require the trade deal to be reopened for talks with Canada and Mexico, something Lighthizer does not want to do.

“I understand, but he's now got Democrats in charge,” Rep. Mark Pocan, D-Wis., a Congressional Progressive Caucus leader, said – explaining Lighthizer might have to reopen talks to get the deal through Congress.

The wild card may be Trump, whose recent imposition of huge tariffs on China, another key trading partner, has rattled global markets and threatened to hike the cost of goods at home.

The China tariffs are not directly related to the NAFTA negotiations, but they’ve spotlighted what might be the highest barrier to a new deal with Canada and Mexico: Democrats’ lingering distrust in the President.

“Whether it's what's currently going on with China, or you look at the previous agreements, that's why the text in the agreement matters,” said Rep. Ben Ray Lujan of New Mexico, the No. 4 House Democrat. “[The protections] should be put right in. There shouldn't be a question.”

The prospects of winning a deal on the USMCA got a huge boost on Friday, when the administration announced it was lifting some import tariffs on steel and aluminum — a major sticking point that had dogged the talks with America’s closest trading partners.

The decision was hailed by business groups, leaders in Canada and Mexico and lawmakers on Capitol Hill, but it doesn’t address the labor, environmental and drug protections Democrats are still clamoring for.

“Is it enough to get a new deal over the finish line? Not for me it isn't,” said Rep. Bill Pascrell, D-N.J. “Any new NAFTA won't get my support until enforcement of strong labor standards can be assured."

Altering the text of the agreement would require signoff from all three countries. In Lighthizer, Democrats see a straight-shooting negotiator, but without the changes, the agreement will likely never see a vote on the House floor.

“He's going to see what he can do to accommodate. One of his major obstacles is the pledge not to open it for any tweaks or any reform or any renegotiation. And that becomes a stumbling block,” said Rep. Ron Kind, D-Wis.

“The Speaker's not going to bring a trade bill to the floor that deeply divides our caucus; she won't do that,” he added.

Reworking previously negotiated trade deals is not unheard of. The George W. Bush administration won trade deals with Colombia, South Korea and Panama but none made it through Congress before the end of Bush’s presidency. The Obama administration then renegotiated the pacts to accommodate concerns from Democrats and industry groups.

Overhauling new NAFTA seems to have even more widespread appeal. Many Democrats have long called for revamping the Clinton-era agreement. “That's happened because of this kind of stuff. So we've got to figure out the right way,” said Rep. Debbie Dingell, D., Mich.

The discussions between Pelosi and the administration highlight the dual track Democrats are navigating in their approach to a president who is anathema to their liberal base. On one hand, Democrats have launched a series of aggressive investigations seeking to uncover potential administrative wrongdoing — probes that even Pelosi has hinted could end in impeachment. On the other, Democrats are hoping to work with Trump in areas where they see common interests.

“I think it's something that folks in the heartland who represent farm communities, who represent the auto industry, can look to as an achievement,” said former Rep. Joe Crowley, D., N.Y., the former House Democratic Caucus chairman, who’s now a leader of the Pass USMCA Coalition.

But the window for Congress to act is running short. Both sides say that the best time for action is before the August recess. Congress is also faced with the need for a deal to avoid another government shutdown and raise the debt limit this fall. Considering the calendar and the barriers still facing new NAFTA, some lawmakers say they “aren’t holding their breath.”

Clearly, highly contentious trade issues remain across the board and these debates should be watched closely as they intensify, Washington Insider believes.

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